Understanding learning’s value depends on measuring what can’t be touched.

In his marvelous book Intellectual Capital, Tom Stewart asked, “What’s new? Simply this: Because knowledge has become the single most important factor of production, managing intellectual assets has become the single most important task of business.”

In the last twenty years of the twentieth century, Wall Street investors changed the way they determined what a company was worth. That’s why Return on Intangibles is the most important metric in the CLO’s toolkit.

In the Industrial Age, tangible assets produced wealth, so investors put their money on plant and equipment. In the Network Era, know-how, innovation, and relationships became the keys to profitability, and investors began to value these invisible things more than physical assets. Things you couldn’t see (intangibles) became more valuable than things you could see and touch (tangibles).

In 1980, tangible assets accounted for 80% of the market cap of companies in the S&P 500. In a scant two decades, an amazing flip-flop took place. By 1999, intangible assets accounted for 80% of the value of the market. Instead of relying investing in expectation of a continuation of a stable past, investors began betting on the future.

In a scant two decades at the end of the twentieth century, an amazing flip-flop took place. Investors who had put their money predictable output began betting on the future. In 1980, tangible assets accounted for 80% of the market cap of companies in the S&P 500. By 1999, the situation was reversed, with intangible assets accounting for 80% of the value of the market.

That change in what investors value is fundamental to understanding return on investment, but sadly many L&D managers are saddled with outmoded, mid-twentieth century notions and procedures that don’t value intangibles at all.

Mechanically, intellectual capital is a company’s market capitalization (its value on the stock market) less its book value (the value reported on its balance sheet). When I attended business school in the seventies, nobody had this anomaly figured out. Shouldn’t stockholder’s equity be marked to market? The historical figures on the balance sheet failed to report what a company was worth.

Intellectual capital comes in several forms. Human Capital is the know-how and abilities of an organization’s people; Relational Capital is personal and business links to customers, partners, and suppliers; and Structural Capital is the infrastructure, processes, culture, and intellectual property that define how the organization operates.

Intellectual capital is largely a matter of mind and relationships. It’s impossible to measure directly, but you know in your heart that it’s real. What’s more important, the plant or the people? Where’s the real value to come from? The biggest upside is improving know-how, relationships, and processes; that’s what gives investors the confidence to up their ante.

Yet some experts tell CLOs not to quantify the returns on intangibles. Fearing a lack of precision in assessing their value, they leave them out of Return on Investment calculations entirely.

Business people love the security of firm numbers: they feel objective, even when they’re not the right numbers. The downside is that leaving intangibles out of the equation almost guarantees that they will not receive the attention they deserve, leading to unbalanced and suboptimal decisions.

Most business managers recognize that they’re managing a living organization, not a balance sheet, but many managers of L&D are still in a fog. Why? Because they’ve learned a narrow view of Return on Investment, namely ROI as seen through the eyes of a bank loan officer.

Commercial loan officers want assurance that if a loan goes south, they will be able to get their money back. Presumably, a borrower who cannot repay a loan is in trouble, perhaps bankrupt. The business is headed down the tubes. The banker looks at “liquidation value.” What could the bank sell the pieces of the company for? What can be salvaged?

In a fire sale intangibles are worthless. The Human Capital has already walked out the door. Relationships are frayed and there’s no one to maintain them. Brand is tarnished. Perhaps some IP and proprietary processes can be sold off at a discount but you can’t bank on it.

Were I evaluating a company in foreclosure, I’d list intangibles off to the side because I wouldn’t expect to be able to liquidate them.

When I’m working with a going concern, it’s the opposite. I pay more attention to leveraging the intangibles because that’s where the big upside resides.

#ITASHARE

]]>Measure what’s importanthttp://www.internettime.com/2013/06/measure-whats-important/
Tue, 11 Jun 2013 01:51:22 +0000http://www.internettime.com/?p=19075Continue reading Measure what’s important→]]>In the last twenty years of the twentieth century, investors shifted from Industrial Age thinking to Knowledge Era thinking. The shift changed how owners value businesses. The change is fundamental to optimizing return on investment, but sadly many L&D managers are mired in mid-twentieth century thinking.

In the Industrial Age, tangible assets produced wealth, so investors put their money on plant and equipment. In the Knowledge Era, know-how and relationships became the keys to profitability, and investors began to value ideas more than physical things. Things you couldn’t see (intangibles) became more valuable than things you could see and touch (tangibles).

Mechanically, intellectual capital is a company’s market capitalization (its value on the stock market) less its book value (the value reported on its balance sheet). When I attended business school in the seventies, nobody had this anomaly figured out. Shouldn’t stockholder’s equity by marked to market? The historical figures on the balance sheet were an accounting fiction.

In 1998, Tom Stewart clarified the situation in Intellectual Capital. Many a manager has yet to get the message. They somehow believe that intellectual capital is ephemeral, immeasurable, and need not be managed. Yet it’s the return on intellectual capital that makes or breaks a Knowledge-Era company.

Intellectual capital comes in several forms. Human Capital is the know-how and abilities of an organization’s people; Relational Capital is personal and business links to customers, partners, and suppliers; and Structural Capital is the infrastructure, processes, culture, and intellectual property that define how the organization operates.

Today intangibles are generally more important than tangibles in boosting value. Take Google as an example. Google’s book value (i.e. assets less liabilities on its balance sheet) is $75 billion. That’s the Googleplex and a whale of a lot of server farms. Google’s market cap (i.e. share price x number of shares) is $295 billion. That’s what investors expect to get back if Google continues to innovate and improve, discounted for the time value of money and risk. Investors rate Google’s intangible assets three times more important than its tangibles. Indeed, if you took away the knowledge in Googlers’ heads, the company’s reputation and relationships, and its secret sauce, you wouldn’t have much left.

Yet some people refuse to quantify the returns on intangibles. Fearing a lack of precision in assessing their value, they leave them out of Return on Investment calculations entirely. Business people love the security of numbers: they feel objective. Leaving intangibles out of the equation almost guarantees that they will not receive the attention they deserve, leading to unbalanced and suboptimal decisions.

“You cannot manage what you cannot measure” is one of the oldest cliches in management, and it’s either false of meaningless. It’s false in that companies have always managed things–people, morale, strategy, etc.–that are essentially unmeasured. It’s meaningless in the sense that everything in business–including peole, morale, strategy, etc.–eventually shows up in someone’s ledger of costs or revenues. Tom Stewart

Most business managers recognize that they’re managing a living organization, not a balance sheet, but many managers of L&D are still in a fog. Why? Because they’ve learned a narrow view of Return on Investment, namely ROI as seen through the eyes of a bank loan officer. (The leading teacher of ROI-for-L&D is a former banker.)

Commercial loan officers want assurance that if a loan goes south, they will be able to get their money back. Presumably, a borrower who cannot repay a loan is in trouble, perhaps bankrupt. The business is headed down the tubes. The banker looks at “liquidation value.” What could the bank sell the pieces of the company for? What can be salvaged?

In a fire sale, most intangibles become worthless. The Human Capital has already walked out the door. Relationships are frayed and there’s no one to maintain them. Brand is tarnished. Perhaps some IP and proprietary processes can be sold off at a discount but you can’t count on it.

Were I evaluating a company in foreclosure, I’d list intangibles off to the side because I wouldn’t expect to get much back from them.

When I’m working with a going concern, it’s the opposite. I pay more attention to leveraging the intangibles because that’s where the big upside resides.

What’s new? Simply this: Because knowledge has become the single most important factor of production, managing intellectual assets has become the single most important task of business. Tom Stewart

Looking back

In early 1999, when I first encountered Tom Stewart’s book, Intellectual Capital, the title scared me away. Too cerebral. I overcame my reluctance and the book became a fantastic eye-opener. The concepts are too important to pass up, especially if you are dealing with a bean-counter/banker decision maker.

Intellectual capital is intellectual material–knowledge, information, intellectual property, experience–that can be put to use to create wealth. It is collective brainpower. Tom Stewart

If you, too, are temporarily stymied, perhaps this will help.

Internet Time Lines, the model railroad that runs on my desk, carts metaphors back and forth. Yesterday, we were hauling tangible and intangible assets.

“When I was 5 years old my mother always told me that happiness was the key to life. When I went to school, they asked me what I wanted to be when I grew up. I wrote down ‘happy.’ They told me I didn’t understand the assignment, and I told them they didn’t understand life.” John Lennon

Humans are driven by their emotions. We make most decisions subconsciously, in the emotional brain. That’s the massive parallel processor that has evolved over millions of years and fills most of our skulls. The prefrontal cortex, the more recently developed logic processor, puts things into words and puts a positive spin on our gut feelings.

“If you threw a rock skyward,” says neuropsychologist Michael Gazzaniga, “and embrued it with consciousness at the top of its flight, its prefrontal cortex would have an explanation for why it fell back to earth before it hit the ground.” We deceive ourselves into thinking we’re rational.

Psychologist Daniel Kahneman won the Nobel Prize in Economics for inventing Behavioral Economics. Kahneman pointed out that the so-called rational economic man had no clothes. Classical economics was based on a mythical creature who was all logic and no feelings. Such people do not exist.

Business tradition asks workers to leave their emotions at home. “This is business,” said the Godfather, meaning that feelings have nothing to do with it. This is absurd, a denial of our humanity. Managers wring their hands that half of the American workforce is not engaged. Is this not an emotional issue? Why should workers leave their feelings behind when they arrive at the office? Don’t we want them to be passionate about their work?

Sigmund Freud started a tradition that haunts the field of psychology to this day. He focused on making deranged people well. The Comprehensive Textbook of Psychiatry, the shrinks’ basic text, has thousands of lines on anxiety depression and not a single line about compassion, forgiveness, or love.

Immanent psychiatrist George Vailliant says, “As a psychoanalyst, I’m paid to help you focus on your resentments and help you to find fault with your parents. And secondly, to get you to focus on your ‘poor-me’s’ and to use up Kleenex as fast as possible.”

The University of Pennsylvania’s Marty Seligman started turning the situation around in 1998. As president of the American Psychological Association, he urged psychologists to “turn toward understanding and building the human strengths to complement our emphasis on healing damage.” In other words, instead of making sick people okay, let’s help okay people feel great.

Money can’t buy happiness. Happiness results from how you feel about things, not how things really are. Harvard’s Daniel Gilbert asks you imagine two people. One wins $58 million in the lottery; the other loses the loss of his legs in a car accident. A year later, they’re just as happy or sad as before their big events.

A meta-study of 225 studies on the effect of happiness in the workplace found that happy employees are 31% more productive, sell 37% more, and are three times as creative as their run-of-the-mill peers. Happiness is a bottom line issue. Don’t believe it? Look at the January issue of Harvard Business Review. Aside from hiring happy people, what can you do to take advantage of this?

Our brains are plastic. No, not polystyrene. You can rewire your brain.

A researcher asked harried office workers to do at least one of five brief exercises over the course of three weeks. Four months later, these workers remained more happy, optimistic, and satisfied with their lives. Happiness had become a habit.

I have been following all five of the routines for the past month. My outlook’s more positive. I am certainly happier. I smile more.

A sample of one doesn’t prove anything, but you may want to give this a shot. Here is my daily routine:

Jot down 3 things I am grateful for.

Email a positive message to someone.

Meditate for 2 minutes.

Exercise for 10 minutes.

Take 2 minutes to describe my most meaningful experience of the past 24 hours.

Give it a shot. What have you got to lose?

If it works for you, spread the gospel. Happiness is contagious. What’s more, you’ll never find an easier way to boost productivity by 31%.

Want to know more? Google your way over to Authentic Happiness. That’s Marty Seligman’s site. It’s a great place to begin your journey to happiness.

How ready are you to tackle Big L Learning? Where does your organization fit on the progression from Hierarchical Organization to Collaborative Organization?

You can take this survey online. We’ll report the aggregate results in a couple of weeks.

Our employees can access the entire Internet from their desktops. ☐ yes ☐ no

Our people are learning and growing fast enough to keep up with the future. ☐ yes ☐ no

Anyone can set up an online meeting at our company. ☐ yes ☐ no

We take time to reflect on our experience. ☐ yes ☐ no

We distribute information through podcasts, blogs, or videos. ☐ yes ☐ no

It’s easy to contribute to a blog or wiki. ☐ yes ☐ no

My team talks about the trends that drive our business. ☐ yes ☐ no

Relationships between departments are collaborative and effective. ☐ yes ☐ no

We learn something from every interaction with a customer. ☐ yes ☐ no

If you checked fewer than five ”yes” boxes, your organization is trailing the mainstream.

Benefits

Assessing the cost/benefit of experiential learning is like asking for a cost/benefit of your telephone connections. You can’t live without it. As one pundit put it, “The ROI of social networking is being in business a few years from now.”

Among the potential benefits of providing a world-class learning function to workers and throughout the extended enterprise are:

Better, more knowledgable customer service

Faster response time

Higher morale

Reduced turnover

More flexibility

More effective supply chain

Bottom-up innovation

Collective intelligence

Build upon one another’s expertise

Recruit superior candidates

Your CFO will point out that these are intangibles. She’s right. But most of the value of companies is intangible. In the two decades of the 20th century, the value of the S&P 500 companies flipped from 80% tangibles to 80% intangibles.

Stock price reflects the value investors put on know-how, brand, track record, and the likelihood that the company will continue to create value in the future. All of these depend on the quality of the workforce and its relationships, and those in turn depend on people’s ability to learn and grow.

SUMMARY

To keep things simple, we began by dividing the world into two types of businesses. We call industrial-age (old school) companiesHierarchical and network-era (2012) companies Collaborative.

1. Control in Hierarchical companies resides at the top. Orders and instructions are pushed down through the organization.
Hierarchical organizations train employees. Hierarchical organizations micromanage: they tell people what to learn.
2. Control in Collaborative companies is distributed throughout the organization. Workers and supervisors have a large say
in what they do. Collaborative organizations help everyone in the extended enterprise learn: contractors, temps, partners, consultants — and customers.

Collaborative organizations give managers and workers the freedom to choose how they learn to do the work. This experiential learning is deeper and more long-lasting than classes.

What if our company has shifted from Hierarchical to Collaborative? Learning would become everyone’s business. We looked at likely changes. We asked what would give us the biggest bang in a Collaborative Organization if we didn’t even have a training department.

A good way to assess the adequacy of the technology you’re going to rely on is to look at capabilities on the consumer web. Facebook
has taught hundreds of millions of people about social networking. Ask net-savvy younger workers how they would like to learn new
skills, and they bring will up the features they enjoy outside of work.

It’s not just about the technology, so we examined also some of the human aspects of implementation, including the rationale for different sorts of social networks.

When you talk to businesspeople, you must speak as they do. Executives only care about training as it relates to execution. Their interest is in moving the corporation forward. You should share that interest. That is what they pay you for.

A sponsor is the person who pays those bills. Sponsors are responsible for championing the case for change (i.e., the vision), visibly representing the change (i.e., walking the talk), and providing reassurance and confidence (i.e., the implementation plan).

Someone once interrupted me during a webinar when I was talking about how trainers need to be aware of corporate objectives and rate their contributions by their impact on the business. “Wouldn’t that require us to understand how the business worked?” he asked. Yes, of course. How could you do your job right without knowing how the corporation worked? Several others jumped in, essentially saying that organizational success and helping to meet strategic objectives was “not my job.”

The days when corporations were larded with layer upon layer of management whose job was to translate strategic imperatives from above into job descriptions and projects down below are long gone. Now all of us are supposed to sing from the same hymnal without the intermediaries.

There’s no cookie-cutter formula for applying metrics, but there is an underlying process.

Measure results throughout your program, not just before and after. Keep your sponsor informed. Frequency is sometimes more important than quantity. Monitoring things early on may enable you to make mid-course corrections.

The Responsibilities You Share

Peter Drucker, hailed as the father of management, is a business guru’s guru. Drucker singled out eight characteristics of effective executives:

They asked, “What needs to be done?”

They asked, ‘‘What is right for the enterprise?”

They developed action plans.

They took responsibility for decisions.

They took responsibility for communicating.

They were focused on opportunities rather than problems.

They ran productive meetings.

They thought and said “we” rather than “I.”

The Metrics Cycle

There’s no cookie-cutter formula for applying metrics, but there is an underlying process.

Generally, you’ll follow these five steps to identify, agree upon, assess and use metrics. This is not rocket science. It’s the same process you already use to accomplish a lot of things in life.

Let’s briefly consider each step.

1. State the desired outcome. Results do not exist inside the training department. In fact, results do not exist within the business. Results come from outside the business. Imagine a no-nonsense businessperson, such as Jack Welch, GE’s former boss. If you can explain yourself to Jack, you’ve mastered this step.

2. Agree on how to measure. The only valid metrics for corporate learning are business metrics. Examples are increased sales, shorter time to market, fewer rejects and lower costs. How do you decide what measures to apply? You don’t. That’s the responsibility of your business sponsor, the person who signs the checks. Together you agree on what’s to be done and how you’ll measure success or failure. Once you’ve settled on the project and its metrics, get it in writing.

3. Execute projects. The projects could be training, an incentive bonus plan or more advertising. Training programs are often part of a larger scheme, and it’s fruitless to try to isolate them. In fact, savvy training directors look for major corporate initiatives they can hitch a ride on.

4. Assess the results. You must evaluate the impact of your efforts with the measures you set up back in the second step. In other words, you are not allowed to mimic Charlie Brown, who would shoot an arrow and then paint the target around it. Why stick with the measures you came up with before? Because that’s how you maintain credibility with your sponsor. You can bring up unforeseen outcomes or anecdotal evidence, so long as you follow up on those original methods first.

5. Begin anew. The only thing worse than learning from experience is not learning from experience. Your post-mortem on the completed project should include a section titled “What to do better next time.”<

]]>http://www.internettime.com/2010/07/its-all-relative/feed/4HRExaminerhttp://www.internettime.com/2010/06/hrexaminer/
Sat, 12 Jun 2010 10:00:06 +0000http://www.internettime.com/?p=3914Continue reading HRExaminer→]]>I am pleased to note that I have been named a founding member of the Editorial Advisory Board of HRExaminer. Check out our weekly magazine for a brilliant take on talent management and HR.

Here’s a self-serving article from HRExaminer – written before I joined the Advisory Board.

Jay Cross is a champion of informal learning, web 2.0, and systems thinking. He has challenged conventional wisdom about how adults learn since designing the first business degree program offered by the University of Phoenix.

Do you remember the first time a boss implored you to work smarter and not harder? Unfortunately, the next thing you heard was probably something akin to “know what I mean?”.

No, as a matter of fact we don’t always know what working smarter means.

Jay’s new un-book Working Smarter (available in on-demand paperback or PDF download) examines how to boost an organization’s collective brainpower. You’ll find an excerpt of his book below that might strike a chord with you in the ongoing conversation that we’re having here at HRExaminer.com on the effective and perceived value of HR.

Cross mashes up his considerable experience in training, business consulting and web 2.0 thinking to put forth a straight forward book designed for managers who want a natural way to improve performance – without the typical management consulting crapola. When Cross does delve into charts, models and mind maps you can rest assured he does so with an aim to clarify, not to earn his business book writing chops. While I’m not done with the book yet I will say what stands out to me so far; Cross does a nice job of balancing the theoretical with the practical – and that’s really useful to us as people who want fresh ideas we can use to improve our team’s results.

I hope you try the book – I’m finding it a worthwhile investment of time. Don’t forget that you can buy the online copy, save some money, kill one less tree and convert the PDF into an online book reader for your iPhone, Android phone and many others.

The current edition of Working Smarter dates from January 2010. Paperback copies cost $16; downloads are $10. (Buy here.)

I think of un-books as more of a subscription that a purchase. A major update is in the works. More than half will be new material. It’s a collaborative effort. Publication is a month or more in the future. The price has not been set as yet. I suggest you buy both, but if you’re only buying one, I suggest you wait a while.

Working Smarter: Informal Learning in the Cloud by Jay Cross and Friends

One of the things I like best about Twitter is the collegial, friendly fire-ish banter among L & D professionals. One of the most active of these professionals is the prolific Jay Cross. Jay, with his colleagues in the Internet Time Alliance, has recently produced the 2010 version of his “unbook,” Working Smarter: Informal Learning in the Cloud.

Convention and controversy

Among the topics often up for grabs lately are ideas around informal learning and the networked learning landscape of the 21st century. Those in the quantitative data/metrics/benchmarking camp argue against the legitimacy of the notion of “informal” learning. As often as not, they claim workplace learning is too important to be left up to happenstance, and requires planning and careful, thorough, design. Cross is clear, though, that he is drawing the “kill the courses, shut down the training department” line with a dramatically heavy hand, admitting that he uses it as much for shock value as anything else, while trying to put forth the idea of workplace learning as different from the traditional view of training course. He also asserts that “informal” does not, as it so often seems to be interpreted, mean “haphazard” or “random.”. Cross acknowledges the time and place of traditional training approaches, particularly for novices (although he questions the decision to put so many resources there rather than with supporting better producers). But seasoned workers, he rightly notes, will not flock to workshops and traditional classes, as they have work to do. Making it easier for them to get to information, to find one another, to learn through collaboration and by accessing meaningful self-service performance support, will strengthen the organization and “help sharp people become sharper.”

From the abstract to the specific

As I said on Twitter one night, “I am 93.2% suspicious of statistics about concepts of abstractions like ‘learning’.” While the data we have all seen – along the lines of “80% of workplace learning occurs outside the classroom” – may be appealing, and so quotable, we know we can’t actually measure anything like “learning” in these terms. But we do know that people learn at work all the time, every day, more from one another (even if that “other” is a person who has uploaded a video tutorial, or updated a Wikipedia page) than from anything that happens in a classroom. We know that peer groups and communities exist to share knowledge and support performance, even if they’re bootlegged and kept under management’s radar. We’ve all experienced a need-to-know moment, made better or worse by how quickly we could put our hands on the right information or find the right person to ask. Doubt me? For the rest of the week, as you go about enacting your work, ask how much of what you are doing came from anything resembling a traditional classroom or e-Learning course. Cross leads the reader on a tour of informal, networked learning and performance support, and helps move the conversation from 50,000 feet to 50. This “unbook” is a compilation of his own ideas as well as interjections from his colleagues in the Internet Time Alliance (Harold Jarche, Jane Hart, Charles Jennings, Clark Quinn, and Jon Husband), with chime-ins from many others. There are checklists, tools, and images, charts and provocative questions. And there are honest remarks about the state of learners, many of whom need to stop waiting for directions and start becoming self-directed. For me, the most value in the text comes not from the parsing out of the finer points of informal and formal approaches, but the articulation of the difference between training and learning. Food for thought, from Cross: “If you were to create the organization’s learning and development function from scratch, what would it look like? Are you still doing huge, expensive training-based software rollouts, or shifting the effort into on-point performance support? Have you taken charge of your organization’s learning function, or just training?”

The unbook

A word about the book itself – it claims it is not one. It’s an unbook, updated every year or so, and published by “Jay Cross and friends,” his colleagues in the Internet Time Alliance Group. Updates appear on Jay’s Internet Time blog http://www.internettime.com so, if they strike your fancy, purchase a bound or e-copy update from Jay’s site, from Lulu, or from Amazon. Where traditional books exist as editions updated every few years, often out of date before they even make it to bookshelves, this unbook is always in Beta. Be aware: While Working Smarter is organized into chapters, it is not the formal, tightly edited, unified work that some readers will expect from a traditional book. I found the organization refreshing, and the get-to-the-point-already style very effective. You can also find Jay on Twitter @jaycross, where he’s a frequent participant in the weekly Thursday night #lrnchat sessions that I help moderate. Join us! 8:30 to 10 PM ET. Jay Cross and Friends. (2010) Working Smarter: Informal Learning in the Cloud. Internet Time Alliance: LULU. $20 paper; $16 e-version, available from Lulu http://www.lulu.com/content/paperback-book/working-smarter-|-january-2010/8259651 or from Internet Time at http://internettime.pbworks.com/FrontPage.

For the remainder of this week, Working Smarter is available for $16 paper, $10 e-version.
]]>Decisions, decisions. Business decisions.http://www.internettime.com/2010/03/decisions-decisions-business-decisions/
Sun, 14 Mar 2010 18:32:01 +0000http://www.internettime.com/?p=3711Continue reading Decisions, decisions. Business decisions.→]]>MAKING BUSINESS DECISIONS: THE HEART AND THE HEAD

Jay Cross examines decision making on learning at work, and gives the lie to some myths about the use of business metrics.

To “earn a seat at the table” where the business managers sit, you must:

Speak the language of business

Behave like an officer of the corporation

Think like a business person

Act like a business person

This applies to any corporation, in both the public and private sectors. It is vital to understand how a business person makes decisions – and in particular the weight they give (or not) to numbers and facts when doing so. It is equally vital to understand that different officers of your corporation will approach decisions about learning in very different ways depending on their circumstances.

Business is about making sound decisions. Every business decision is a trade-off. (If there’s no trade-off, it’s a no-brainer.) An important corollary: There is no free lunch. List the pro’s of doing something and the con’s of doing something else. Be aware of what you’re trading off when making a decision. Every trade-off is a risk. That doesn’t mean you should shy away from risk. Quite the contrary, for no risk means no reward. A decision-maker who disregards risk is a fool, a pauper, or both.

Fortune favors the bold. An astute businessperson seeks the most lucrative balance of risk and reward. Every business decision is made with less than perfect information, and every decision entails taking a risk. Most investment decisions trade off risk and reward.

Every business decision is made with less than perfect information, and every decision entails taking a risk. Most investment decisions trade off risk and reward. The way to make sound decisions is to judge when you have enough information to move ahead and when the level of risk is acceptable. He who hesitates is lost. Saying “We don’t have enough information” is not an acceptable excuse. If the timing is not right, it would be better to say, “The downside is losing $500,000, and we can’t identify the range of probability around that occurring any finer than 25% to 75%.”

When you talk about the bottom line, you damn well better know what it is. I don’t mean to insult your intelligence, so permit me to explain that I didn’t understand the difference between profit and revenue until I took a correspondence course in accounting five years after graduating from college. If you are not fully fluent with terms like revenue, earnings, cost, cash flow, margin, and value, take a look at here and get a friend to explain the workings of the basic business model.

THE ENVIRONMENT OF BUSINESS

Everything is relative, including evidence and “hard numbers.” An executive, a manager, a training director, and a worker each have different but valid ways of evaluating the effectiveness of learning.

People see what they focus on; they don’t see what’s really there. An alcoholic sees the liquor stores other people breeze by. A foodie always remembers whether or not she has eaten at a particular restaurant. A top executive sees long-term trends; a factory labourer sees the clock. (Training directors see learners; everyone else sees workers or employees.)

Let’s walk in the shoes of different people and see what they notice.

Knowledge Workers

The knowledge worker’s objective is to learn what it takes to do the best she can. The learned worker enjoys the fulfillment of a job well done, the rewards that go with high performance, and the accumulation of marketable skills. Today’s workers are out for themselves. Not selfishly but realistically. Free agents. They recognize that their careers will last many times longer than their employer. Our market driven world drives people to increase their personal marketability. Incoming workers are more demanding than previous generations. They have no patience for irrelevant exercises, be they useless curriculum or teaching what they already know. Their watchwords are “Don’t waste my time” and “Less is more.”

A great industrial worker might be half again as productive as his middle-of-the road peer. A great knowledge worker can be several hundred times as productive as his peer. These people need the room to excel. They want their organizations to give them the dots but they want to connect the dots for themselves. Workers want learning that is ‘pull’, i.e. they find and use what they feel they need, instead of ‘push’, i.e. someone else decides the subject matter for them.

The incoming generation of knowledge workers demand opportunities to learn through their work; otherwise, they will pick up and go elsewhere.

Training Directors

In the industrial age, the worker was told she was not paid to think. In the knowledge era, workers are paid to think. And they need to keep current with a buzz of things racing by.Workers expect to learn things in small chunks. Learning has shifted from something outside of work to something embedded in work. Stand-up instruction is giving way to peer learning.

The training director’s objective is to help his sponsors achieve their goals. Sponsors? Usually this is the people with the authority and wherewithal to sign the checks. Training cannot rate itself; it doesn’t own the yardstick.

Business managers set objectives; training directors help achieve them. ‘Proof’ that training is working is when sponsors believe it is.

Pity the training director. There’s more and more to learn. The old training they’re accustomed to doesn’t work well any more. They must interpret business needs into learning opportunities. And even as knowledge workers take responsibility for their own learning, the training director is likely to be held accountable when learners’ performance is underwhelming.

Typical assessment measures – the four or five levels – are at best pieces of a much larger puzzle. “Level Four” will always be out of reach because the instruments of measurement belong to another level in the organization.

The shift from training (we tell you what to learn) to learning (you decide what to learn) increases the scope of the director’s job from classes, workshops, and tests to the broad array of networks, communities, meta-learning, and learning culture.

You live your life as if everything is a miracle or nothing’s a miracle; for the training director, the sky’s the limit or the job is untenable. Today’s training director must gain control by giving control.

Here are some things one might add to any training director’s job description:

• Supporting the informal learning process

• Creating useful, peer-rated FAQs and knowledge bases

• Supplementing self-directed learning with mentors and experts

• Using smart tech to make it easier for workers to collaborate and network

• Encouraging cross-functional gatherings

• Helping workers learn how to improve their learning skills

• Explicitly teaching workers how to learn

• Enlisting learning coaches to encourage reflection

• Calculating life-time value of a learning “customer”

• Explaining the know-who, know-how framework

• Creating a supportive organizational culture

• Setting up a budget for informal learning (There’s no free lunch.)

• Positioning learning as a growth experience

• Conduct a learning culture audit

• Adding learning and teaching goals to job descriptions

• Encouraging learning relationships

• Supporting participation in professional communities of practice

Managers

Getting things done is the role of managers. Meeting this quarter’s numbers is the number one priority. “Long-term” means one year. Great execution merits a great bonus and more rapid promotion. Execution is judged by relative success in meeting planned objectives.

Common measures are gain in market share, increased revenue, customer satisfaction, and other business metrics. The manager does not necessarily care what it takes to hit the numbers. If people could gain new skills by popping smart pills instead of training, pharmaceuticals would push training aside. Sometimes the numbers are even manufactured.

A couple of hundred years ago, the factory system kicked off the industrial revolution. The need for coordinated action led to working hours, the urban workforce, specialization of jobs, the quest for efficiency, and the separation of management and workers. In the west, the educational system adopted German methods of schooling soldiers to convert feisty farmers and hunters into obedient factory workers.

Great ideas have a life cycle. They grow from obscurity among enthusiasts and fanatics to nearly universal acceptance and eventually to decline, as the world passes them by. Business managers cling to ROI and conventional training because they are known entities, not because they are right. These conceptual blinders retard the pace of progress.

We recently toured a corporate headquarters where staying late at work was prized by managers. Time on the job was thought to be correlated with output when the job is tending an assembly line. In knowledge work, overwork leads to stress and a reduction in cognitive acumen. It’s better to have a team that leaves on time to exercise than one that is chained to its desks.

Executive management

Top management is led by what creates value for stakeholders. This generally involves innovation, staying power, adherence to corporate values, and sufficient organizational flexibility to keep ahead of the speed of change. Shareholder confidence along these dimensions fuels market capitalization.When investors judge that the firm can innovate, improve, and grow, the value of its shares increases, as does the take-home pay of the executive.

All learning, informal or formal and anything inbetween, should be evaluated with the same metric: whether people who participate in it are doing the job.

Executives realize that competing successfully in business requires teams of inspired employees – mentally equipped to make sound decisions on the fly; able to execute good ideas in a snap; and proactive when it comes to taking initiatives and bringing innovation.

Being on the front line dealing with customers, these employees don’t have time to run every idea up the management flagpole. Leaders want to field a team that’s in the game and ahead of the crowd. They want to pile on innovation that meshes smoothly with what people already know. They want organizations that make bold moves and respond to change as if by instinct. The overall goal: an environment where people learn faster and better than the competition.

Getting there takes more than a lavish investment in training. Time is frequently more important than money.” “We are moving from a world in which the big eat the small to a world in which the fast eat the slow,” says Klaus Schwab, director of the World Economic Forum.

Let’s look at how senior decisions are really made. The staff has shopped various projects around, gathered the figures, done due diligence on suppliers, run the numbers, assessed the impact of changes in the marketplace, and prepared terse summaries for each scenario. Six business cases for new investments, bound with a clear sheet up front, rest in a pile on the coffee table at the executive vice president’s weekend cabin. (This is going on simultaneously at the CEO’s place by the lake, the COO’s condo, and a few other spots.)

A couple of projects are no-brainers; these are so integral to the organization’s mission, giving a go-ahead is a mere formality.

Projects that enter new territory, eLearning for example, warrant more detailed consideration. If you were to eavesdrop on the executive’s internal thought processes, you’d hear something like this:

[Inner dialog] “Good Heavens, this effort is going to cost us $8 million and change. But our people are our hope for the future. The analysis shows that we’re already spending nearly that much on training. I wonder what Mikey thinks. The ROI is better than building another fab plant but some of the underlying numbers are soft. Of course there’s no guarantee that the fab plant wouldn’t be another white elephant when it comes on stream in three years. The breeze is picking up outside. I bet it rains tonight. Without eLearning, we’ll never become an eBusiness. Some of our systems are pretty creaky right now and would benefit from streamlining.We need to shrink cycle times throughout our organization. This eLearning infrastructure would give Charlie a platform for broadcasting and reinforcing his message about transforming our organization. The Net Discounted Cash Flow is $2 million better than if we took this on ourselves. And the real problem there is that our IT staff would be swamped. And this would wait in line behind the other missioncritical projects they’re working on. Keeping up with eLearning is not a core activity for us; we should outsource as much of it as we can. I wonder what Charlie thinks. The ballgame comes on in about ten minutes. Where do I come out on this one? I’m optimistic about the potential. It feels right. I’ll back it at the Executive Committee Meeting on Monday. I better call the wife to let her know I arrived safely. I could use a slug of single malt about now….”

Don’t believe it? Most senior executives have more faith in gut feel than numbers. The numbers are input. The decision is broader than that.

Five years ago, an Information Week survey revealed that “more companies are justifying their ventures not in terms of ROI but in terms of strategic goals… Creating or maintaining a competitive edge was cited most often as the reason for deploying a business application.”

Decision making at work is as much about what the heart says (based on experience and values) as the head (dictated by the numbers). To give yourself a chance to lead on learning in your organization you need to understand and appeal to both – at all levels.

This article will probably be folded into the next version of Working Smarter.
]]>Learning on the Holodeckhttp://www.internettime.com/2010/02/learning-on-the-holodeck/
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Many people think of virtual worlds as the realm of characters in bizarre costumes and companies out to waste their PR budgets. Karl and Tony see a phase change in how people learn.

Learning is social, and I think this has something to do with the power of watching your avatar experience something as opposed to simply imagining it in your mind.

I heartily recommend the book but I suggest jumping around as you read. The first section sets the stage by setting out the fundamentals: the webvolution, the immersive internet, the ineffectiveness of the classroom, and “the brave new training world.” If you read this blog, you already know this stuff. They move on to architecture and archetypes. Everyone will want to read the nine cases which demonstrate a variety of learning environments. If you take part in Thursday evenings’ #lrnchat on Twitter, you can skip the sections on traditional design; you have already witnessed the ADDIE wars. The implementation advice is priceless, as are the essays by four revolutionaries.

Tony and Karl have convinced me that 3D learning is on the way. I hate to be a stick in the mud but I don’t yet think it’s ready for prime time. It’s going to be a while before most corporate citizens will be comfortable with this. Many workers’ minds are too calcified to handle the concept of avatars and alternative realities. Give it five years, and people will be saying “Why didn’t we do this sooner?”

I don’t expect 3D learning environments to thrive in Second Life. Second Life is a pioneer and is the gorilla in the 3D space right now. However, SL can’t shed its DNA, and corporations aren’t going to train workers while the twisted sisters next door solicit customers.

Conservative organizations and schools are more likely to adopt environments developed specifically for business and academic applications. Examples are the knowledge worker environments developed by Proton Media and the interactive simulations coming out of Toolwire.

ProtonMedia: a professional environment, no funny hats

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Inside Learning Technologies is an important magazine in the U.K. (Isn’t it odd that while the net spans the globe, learning magazines remain confined to their home countries?)